en.Wedoany.com Reported - Amid geopolitical risks and severe macroeconomic fluctuations, David Franklyn, fund manager at Australia's Argonaut Funds Management, stated that in the current market environment, investors need to focus on portfolio quality more than ever. He emphasized that regularly conducting "stress tests" on held stocks and reassessing views on quality and liquidity are key to navigating market downturns.

The stock market started 2026 strongly, but the Iran war broke that momentum. Franklyn noted that the macroeconomic outlook has changed significantly. The widely anticipated Federal Reserve rate cuts have become uncertain due to surging oil prices (influenced by the situation in the Strait of Hormuz), with inflation now at its highest level in three years. Few banks predict rate cuts this year, and some expect the Fed to raise rates under the leadership of new hawkish Fed Chair Kevin Warsh. This has dealt a heavy blow to precious metals bulls: gold prices fell to an eight-month low last week, dropping below $4,000 per ounce after exceeding $5,500 per ounce at the end of January; silver prices have halved from their record level of $120 per ounce. Other metals and stocks have also performed poorly due to concerns over cash rates, a stronger US dollar, and rising bond yields.

Franklyn believes that besides the war, momentum is also a key driver of the stock market. Gold has shifted from "momentum buying" to "momentum selling," with many investors who previously poured into physical gold ETFs now rushing out. He advises investors to regularly stress-test their portfolios, asking, "If the market drops 10% tomorrow, what would you think? How would you feel about the stocks in your portfolio? Would you be willing to hold them?" He cautioned that portfolio construction is crucial and should not simply follow broker-recommended stocks. Investors need to reassess their views on quality and liquidity, avoid holding only illiquid stocks, and maintain some flexibility and cash positions. Currently, Argonaut has increased its cash reserves in its natural resources and gold funds from about 15% to approximately 25% as a buffer to seek quality opportunities during market downturns.

Despite short-term market pressure, Franklyn remains optimistic about the long-term prospects of commodities such as copper, lithium, and uranium, believing that gold is in a washout phase and downside momentum will eventually fade. In the mining stock sector, Franklyn and Argonaut have identified several companies with genuine quality. KGL Resources (ASX:KGL) has just completed the A$180 million bookbuild portion of a A$300 million rights issue, which, combined with a A$300 million streaming deal with Wheaton Precious Metals, will fund its Jervois copper mine in the Northern Territory. Franklyn noted that the new management team, formerly from Glencore, impressively raised A$300 million through Argonaut. He believes high-quality copper projects are hard to find, and now is the time to start gradually buying. Additionally, high-growth large-cap gold stocks such as Genesis Minerals (ASX:GMD), Ramelius Resources (ASX:RMS), and Capricorn Metals (ASX:CMM), as well as Northern Star Resources (ASX:NST), which has seen its market cap evaporate by billions due to production downgrades and may offer turnaround appeal, have also attracted attention. In the lithium space, stocks like PLS Group (ASX:PLS) and Canada-listed Lithium Argentina are showing better value after the recent sell-off in battery metals.

Franklyn also pointed out two main types of opportunities in the market: large miners with long mine lives, such as the soon-to-merge Teck and Anglo American, and US-based Freeport-McMoRan, whose stock has been hit by a fatal accident and production damage at the giant Grasberg mine in Indonesia; and development stories like Marimaca. Argonaut's stock pick of the month is the dual-listed Marimaca Copper Corp (ASX:MC2). The stock is down about 42% year-to-date, but its Marimaca Oxide Deposit project (50,000 tonnes per year) in the Antofagasta region of Chile is considered by Franklyn to be one of the world's top undeveloped copper assets. The project is near South32's Sierra Gorda, BHP's Spence, and Capstone's Mantos Blancos, and is only 25 kilometers from the high-grade Pampa Medina discovery zone, offering significant exploration potential. Unlike major porphyry copper deposits in the Andes, its proximity to the Chilean coast allows for a relatively low capital expenditure of just $587 million for a heap leach project. Franklyn believes that projects of this scale, producing 50,000 to 100,000 tonnes per year with moderate capex, are rare globally and offer potential for re-rating through self-development or acquisition. Argonaut Funds Management is a high-conviction resource sector investor managing the Argonaut Natural Resources Fund and the Argonaut Global Gold Fund, with David Franklyn serving as the fund manager for the Argonaut Natural Resources Fund.

This article is compiled by Wedoany. All AI citations must indicate the source as "Wedoany". If there is any infringement or other issues, please notify us promptly, and we will modify or delete it accordingly. Email: news@wedoany.com